Two large for-profit hospital companies did deals during the height of the leveraged buyout frenzy. KKR purchased HCA, while Community Health Systems (CHS) bought Triad Hospitals. White House Health Czar Nancy-Ann DeParle sat on Triad's Board which approved the sale. Forget her $1.4 million profit. What impact did leveraged financing have? Interest expense rose drastically after the deals were consumated.
CHS interest expense grew from $94 million in 2006 to $652 million in 2008. Interest expense per owned hospital went from $1.3 million in '06 to $5.5 million for '08. The $4.1 million rise is a 300% increase.
HCA's interest expense grew from $655 million in 2005 to $2.2 billion in 2007. Interest expense per owned hospital rose from $3.9 million in '05 to $13.2 million in '07. It dropped slightly in '08 to $12 million per HCA hospital.
Hospital patients and insurance companies paid $2 billion more to cover interest expenses associated with deals. Not one doctor, no new technology was added under that $2 billion. Deal makers are in key spots under President Obama's health care reform.
Private companies are integral to Obama's financial recovery efforts and public infrastructure plans. It looks like they'll win in health care reform. Why am I not surprised?
